Dears,
I have come to understand that the standard best practice regarding landed cost management is first to record landed cost payments through purchase invoices and later update the item cost through a landed cost voucher (after purchase receipts are made), that way the Expense Included in Valuation account will offset/becomes zero.
However, I have a change requirement from my client who wants the payments made for these landed costs to be recorded as an asset (be represented as an asset in the balance sheet) instead of an expense account (in the P&L statement).
Mind you that these landed costs (insurance, bank charges, freights, etc.) are known before the goods are received and since they are paid in advance, the client wants to record them as a supplier advance or goods in transit (as an asset account).
Here is my requirement as an example.
-
Advance payment (for ABC Insurance) of $1,000:
Purchase Invoice
Goods In Transit (Asset) - $1,000 Dr.
ABC Insurance (Liability) - $1,000 Cr. -
Landed cost voucher after the purchase receipt:
Landed Cost Voucher (LCV)
Goods In Transit (Asset) - $1,000 Cr.
Stock on Hand (Asset) - $1,000 Cr.
Your quick response is appreciated,
Thanks.